The U.S. Constitution was supposed to safeguard Americans liberties by curbing
potential government abuses, but Framers such as James Madison were far too optimistic
about the sustainability of limited government. History and theory show that limited
government does not stay limited when a societys prevailing ideology promotes governments
expansion. Perhaps the long-term solution to the problem of an increasingly powerful state
that encroaches on liberty is to create stateless institutional arrangements, based on explicit
individual consent, which would defend people from aggression, adjudicate disputes, and
enforce individuals just rights.

War and taxes go together like politicians and bogus campaign promises. When increases
in the rates of existing explicit taxes and in the hidden inflation tax are not sufficient or
viable, new forms of taxation are introduced, such as tax withholding. Adopted for federal
employees temporarily during the U.S. Civil War, withholding became a permanent fixture
during World War II. As the U.S. Treasury Department admits, income-tax withholding reduced the transparency of the [federal income] tax, which made it easier to raise taxes in
the future.

Policymakers respond to crises in panicky ways that often increase the risk of further
crises, as the Federal Reserves response to the recent financial turmoil and economic
malaise illustrates. From August 2008 to October 2009, Federal Reserve policies led to
an increase in excess commercial-bank reserves at the Fed from less than $2 billion to $995
billion, an all-time high. If the banks begin to use these funds to make new loans and
investments, the Fed will face a dilemma: either do nothing to mop up the excess reserves
(allowing them to fuel rapid price inflation) or mop them up (by traditional open-market
operations or by offering banks higher interest rates on their reserves at the Fed). Either choice
entails higher interest rates that might retard recovery.

President Dwight D. Eisenhower was right to warn Americans about the unwarranted
influence of the military-industrial complex. The cozy long-term relationship between
defense contractors and the militaryfacilitated by a revolving door for leaders of the two
sectorsamounts to military-economic fascism. But whatever one calls it, this relationship
has ill served the American taxpayer. The absence of proper accounting procedures at the
Pentagon has invited the theft of untold billions of dollars by defense contractors. This
corruption will persist as long as the United States continues its postWorld War II foreign
policy of global hegemony and recurrent military interventions, which places a strong floor
beneath the military-industrial-congressional complex and excuses its malfeasance.

What can one say about foreign-policy shapers such as McGeorge Bundy, Robert
McNamara, Henry Kissinger, Dick Cheney, Richard Perle, and Paul Wolfowitz? Must
they be fools or charlatans? Indeed, they are even worse: all too often they are fools, bunglers,
charlatans, liars, and murderers, Robert Higgs writes. Such persons playing with dynamite
poses a grave danger to the rest of us. By now, we ought to have seen through them and their
schemes a great deal more clearly than most of us have.

Synopsis

Why has the U.S. government
become a growing threat to the
civil and economic liberties of
ordinary Americans? Does the nation suffer
from a lack of democracy or have we deluded
ourselves into believing that democratic institutions
can deliver more than they actually
can? Is contemporary democracy the best
political system for securing the blessings of
libertyor should we search for better alternatives
to government as we know it?

In Delusions of Power: New Explorations
of the State, War, and Economy, economist and
historian Robert Higgs offers penetrating insights
about fundamental issues surrounding
democracy and the legitimacy of the state, as
well as fresh observations about the turning
points in American history during the past
century: the world wars and the Cold War; the
post-9/11 national-security state; and major
economic calamities, including the financial
crisis of the 2000s.

For the growing number of readers
already familiar with Robert Higgss intellectual rigor, elegant erudition, and morally
grounded wit, Delusions of Power offers predictably
rewarding fare. For readers new to
Higgss works, this collection of self-contained
essays and book reviews will provide new vistas
from which to see the world with greater
clarity. Higgs explains why many common
assumptions about the U.S. government are
false and dangerous. Moreover, he shows
that seeing through the delusions of power is
not only necessary if we are to foster a more
humane world, but also a rewarding endeavor
in its own right.

The State, Democracy,
and Crisis Policymaking

The legitimacy of government as we know it
and the factors that sustain such government
are the focus of Part I. In chapter 1, Higgs
casts doubt on James Madisons conviction
that the U.S. Constitution can maintain
effective checks and balances to prevent
government abuses. Friends of liberty, Higgs
argues, would do well to pursue stateless alternatives to the elusive ideal of limited
government. In addition, such a reexamination
is morally urgent, he suggests in chapter
2, because the common arguments put forth
to justify government as we know it run
parallel to the specious arguments once used
to justify slavery.

Although thinkers across the centuries
have warned that democracy tends toward
mob rule, Higgs notes in chapter 3 that democracy
is also beset with a different problem:
once elected rulers take office, the democratic
system itself cannot help the people to bring
rulers to account until the next election, by
which time the outcomes of their bad decisions
may be irreversible, as U.S. entry into
each of the world wars shows. Moreover,
election ballots rarely offer voters worthy
alternatives, he argues in chapter 4.

Nothing promotes the growth of the
state as much as wars and economic crises.
Chapter 5 illustrates this thesis by examining
the U.S. governments response to the 9/11
terrorist attacks. Chapter 6 examines a dozen
dangerous presumptions characteristic of
governments responses to crises. Chapter 7
explains why crises create opportunities that
political actors inside and outside the government
seek to exploit. Those who are quick
to support unnecessary wars typically pay
lip service to wars horrors, but then support
fighting anyway. In chapter 8, Higgs examines
fourteen different rationales prefaced by War
is horrible, but . . . 

Key Players and Events

Part II looks more closely at key players and
events that have transformed the U.S. government.
Chapter 9 examines the influence
of Colonel Edward M. House and the role
he played in Woodrow Wilsons decision to
take the United States into World War I.

The next three chapters look at lesserknown
aspects of World War II. Chapter 10
examines the role of U.S. trade sanctions in
provoking Japans decision to attack Pearl
Harbor. Chapter 11 explains why most
Americans are ignorant about the events that
led to U.S. involvement in the war. Chapter
12 describes the wartime origins of modern
income-tax withholding.

Chapter 13 sheds light on the U.S. economy during the Great Depression and World War II by examining an often overlooked variable: total hours worked. This approach not only refutes the myth that the New Deal brought about quick or full economic recovery, but also shows that the increase in real output during the war was actually much less miraculous than generally claimed.

Since the 1960s, domestic programs have been hyped intermittently with all the fervor of a military campaign. Chapter 14 illuminates the role that professional economists played in creating the ideological and political climate in which President Lyndon Johnsons War on Poverty and Great Society programs took place. Chapter 15 considers Nixons New Economic Plan and the harm it caused.

Economics and Political Economy

Part III examines the U.S. governments recent economic policies, its stance on national security and war-making, and its tendency toward overreaction during and after national crises. Chapter 16 exposes six major mistakes of the current orthodoxy about financial crises and economic recessionserrors about aggregation, relative prices, the rate of interest, capital and its structure, malinvestments and money pumping, and regime uncertainty.

Several chapters then examine the political economy of U.S. national security policy. Chapter 17 examines the hidden costs of U.S. war-making, a subject about which most Americans unwisely defer to the judgments of politicians and the national-security establishment.

Chapter 18 illuminates presidential decisions to wage war and resolves the paradox of why presidents have led Americans into wars against nations that posed no existential threat to the United States.

Chapter 19 analyzes the reciprocal corruption of the government and the defense industry. Although the proximate cause of the continual scandals in defense contracting is the absence of proper accounting procedures at the Pentagon, a deeper cause is the U.S. governments huge geopolitical ambitions, Higgs concludes.

Chapter 20 looks at how major U.S. neoimperialist wars end. National leaders choose war or peace based on their perceived interests, Higgs argues, and those perceptions can change with changes in public attitudes toward a wars mounting human and economic costs, as happened during the Korean and Vietnam wars.

Policymakers responses to the financial crisis that came to a head in September 2008 have led to another surge in the governments size, scope, and power. Chapter 21 examines the plethora of ad hoc policiesproducts of frightened overreactionsadopted by politicians and regulators with little grasp of economic reality.

Review of the Troops

What do contemporary scholars make of Leviathan? In Part IV, Higgs reviews seven recent books related to the modern state and its accretion of power. The first is Sheldon D. Pollacks War, Revenue, and State Building: Financing the Development of the American State. Pollack shows that war is often the precursor of the welfare state because war gives rise to new funding mechanisms that augment national treasuries. Oddly, although he recognizes the predatory origins of the state, he views the U.S. government as a benign protection racket (his term).

Higgs also has mostly kind words for The Pearl Harbor Myth: Rethinking the Unthinkable, by George Victor, an account of Roosevelts stealthy campaign to provoke Japan to attack the United States and thereby draw the nation into the war in Europe through the back door. A diary entry written by Secretary of War Henry Stimson is but one piece of the evidence of Roosevelts deceit.

In 1961, President Eisenhower warned the nation about the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The development of that concept is the subject of James Ledbetters Unwarranted Influence: Dwight D. Eisenhower and the Military-Industrial Complex. Higgs shares Ledbetters conclusion that meaningful reform of the U.S. governments symbiotic relationship with the defense industry is unlikely as long as Uncle Sam seeks involvement in most of the worlds disputes.

One book that offers clarity on U.S. foreign policy is Christopher J. Coynes After War: The Political Economy of Exporting Democracy. Coyne explains why national reconstruction usually fails, especially in countries that seem to need it the most. His use of new economic tools, his rigorous empirical analysis, and his clear, dispassionate presentation illuminate a critical subject and make his book a worthy model for other scholars, Higgs concludes.

In Magic and Mayhem: The Delusions of American Foreign Policy from Korea to Afghanistan, Derek Leebaert maintains that U.S. leaders have carried out reckless adventurism abroad in large part because they are have been deluded by grandiose nostrums and magical thinking that grossly exaggerate their ability to effect positive change. Leebaert argues forcefully that these delusions have enabled politically astute operatives (emergency men) to craft hasty policy responses to crises, but, according to Higgs, he too often he fails to consider that a quest for political power and personal aggrandizement is also at work.